Peter Navarro: A 'Bricklayer' Of Trump's Protectionist Wall

National Trade Council Director Peter Navarro says the U.S. needs to unwind "bad" trade agreements and strike new ones that would prevent such practices. He says the administration is off to a good start.

Emily Bogle
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Originally published on May 3, 2017 7:28 am

On his 100th day in office, President Trump signed an executive order creating a new Office of Trade and Manufacturing Policy in the White House. The office will be led by National Trade Council Director Peter Navarro, whom Trump called "one of the greats at trying to protect our jobs." NPR's Rachel Martin spoke with Navarro about his mission: "to defend and serve American workers and domestic manufacturers."

Why manufacturing?

"This country is built on manufacturing," Navarro tells Martin. "I'm not talking about metal-bashing manufacturing. I'm talking about a constant renewal of manufacturing. High-tech manufacturing. And what we've seen since 2000, 2001, is we've seen the exodus of our factories and jobs."

The U.S. had more than 17 million factory workers in 2000. But over the next decade, nearly 6 million manufacturing jobs disappeared. Factory employment has rebounded slightly since the depths of the recession. But just over 8 percent of American workers are employed in factories today, down from 13 percent in 2000 and 20 percent a generation earlier.

Navarro says that decline is critical, arguing all jobs are not created equal.

"A manufacturing job has inherently more power to create wealth, because they on average pay more and also to create more jobs," Navarro says. "If you have the manufacturing job as the seed corn, then you have jobs in the supply chain. Then towns spring up around that where you have the retail, the lawyers, the accountants, the restaurants, the movie theaters. And what happens is when you lose a factory or a plant in a small- or medium-sized town in the Midwest, it's like a black hole. And all of that community gets sucked into the black hole and it becomes a community of despair and crime and blight rather than something that's prosperous."

Wisconsin, Iowa, Michigan and Ohio are among the most manufacturing-intensive states in the country. All four went for Trump in November after favoring Barack Obama four years earlier.

Navarro and Trump blame trade for the decline in factory jobs

Many economists argue that automation and other productivity tools have played a larger role than trade in the decline of U.S. factory jobs. American factories are churning out more products than ever, even as they need fewer workers to do so.

Navarro concedes that "demographics and automation are part of the puzzle." But he insists that "the biggest piece of the action is the unfair trade practices and bad trade deals. And if you don't believe that, just go to the booming factories in Germany, in Japan, in Korea, in China, in Malaysia, in Vietnam, in Indonesia, in Italy — every place that we're running deficits with."

Like his boss, Navarro points to the imbalance between imports and exports as evidence that the U.S. is getting a raw deal.

"We run a chronic, persistent, and large trade deficit in goods on the order of $700 billion a year," Navarro says. "In any given year, that would be OK. But when we do it every year for 10, 15, 20 years, it represents a transfer of our net worth to the rest of the world." (Counting services, where the U.S. has a surplus, brings the overall trade deficit down to about $500 billion.)

Many of the dollars that foreign companies make by selling to the U.S. wind up reinvested in this country. But that's little comfort to Navarro, who describes the purchase of American companies, office buildings and farmland by foreign interests as "conquest by purchase."

Traditional economic theory argues that trade can be mutually beneficial, allowing businesses in each country to focus on what they do best. But Navarro insists those gains are undermined when other countries "unfairly" subsidize exports, manipulate currency, steal intellectual property, or require American firms to transfer technology as a cost of doing business.

He says the U.S. needs to unwind "bad" trade agreements and strike new ones that would prevent such practices. Already the Trump administration has backed out of the Trans-Pacific Partnership, announced its intent to renegotiate the North American Free Trade Agreement, and hinted that a trade pact with South Korea could be canceled as well.

"That hat trick of deals — TPP, NAFTA and South Korea — what do you call that? That's a pretty damn good start," Navarro says.

Critics have warned that administration policies could spark a trade war, hurting U.S. exports. But Navarro is not worried, arguing that other countries have more to lose from such a confrontation than the U.S.

"If you think about America as the largest consumer in the world and the third-largest exporter, we have the most bargaining power of any country in the world," Navarro says.

Navarro underscores the president's "America First" agenda, saying the U.S. should focus on homegrown economic concerns when it negotiates trade deals. He argues the country has gone astray when it tried to achieve larger strategic goals at the bargaining table.

"The thought process over the last 30 years — and it's been a very conscious thought process — has been to sacrifice our economy, often on the altar of foreign policy and geopolitics," Navarro says. "A lot of these trade deals that we enter into are done not to create jobs here in America, not to boost our income, but to forge alliances and to address things other than the economy."

Manufacturing and national defense

The Trump administration has launched investigations into rising steel and aluminum imports, using a 1960s-era law that's designed to protect domestic industries considered critical for national defense. Depending on what those investigations find, the administration could order new tariffs or import quotas.

Unlike former President Dwight Eisenhower, who famously cautioned against the rise of the "military-industrial complex," Navarro and Trump see the military and industry as natural partners.

"How did we beat the Germans and the Japanese in World War II?" Navarro asks. "Certainly we had brave men and women on our ships, planes, tanks, whatever. But ultimately, what we did is we dramatically outproduced both of those countries in armaments, and we simply overwhelmed them."

A "bricklayer" for Trump's wall of protectionism

In announcing the new Office of Trade and Manufacturing Policy, Trump sang the praises of the new director.

"Peter Navarro has fought against trade abuse for a long time," Trump said. He even gave Navarro the ceremonial pen he used to sign the executive order.

"What I love about the president is he creates moments for people who are down the scale in things," Navarro says, "whether it's a bricklayer in one of his buildings or someone who works in the Executive Office Building," across from the White House.

Navarro says he thinks of himself as a kind of bricklayer in the president's effort to build a protective wall around U.S. workers and industries.

"My mission really is to defend American workers and domestic manufacturers. These are the people who built America and who will build America," Navarro says.

While he has a Ph.D. from Harvard, Navarro comes from a modest background. His father was a musician and his mother worked as a secretary. "I've always — given my upbringing — identified with the working class of this country," Navarro says. "Every day I get up and when I go to work it's to create more jobs for the American people and defend the jobs we have from unfair trade practices and bad trade deals. I take that very seriously."

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RACHEL MARTIN, HOST:

President Trump has amended several of his positions since inauguration. One thing has remained consistent, though, Trump's belief that the United States is getting a raw deal from international trade agreements.

STEVE INSKEEP, HOST:

His view is not shared by many Republicans. They used to be the free trade party. Opposition to free trade is heard from some on the left and also from presidential adviser Peter Navarro. Navarro heads the administration's National Trade Council and its Office of Trade and Manufacturing Policy.

MARTIN: He says America's trade deficits hurt the country's manufacturing base. And he argues that a weak manufacturing base is a national security threat.

PETER NAVARRO: What we're doing, essentially, is mortgaging our future. So when that money comes back, it comes back in the form of buying our financial assets, our companies, our farmland, our homes, our office buildings. It represents a transfer of our net worth that results from unfair trade deals and unfair trade practices.

INSKEEP: Navarro wants aggressive countermeasures, like new tariffs on some imports or renegotiation of trade deals like NAFTA.

MARTIN: He's very controversial among his fellow economists. That doesn't bother him at all, though. He laid out his ideas and priorities when we spoke with him yesterday.

NAVARRO: So the first thing we have to recognize is that the key to a strong government and a strong budget is a strong economy. And you can't have a strong economy without a strong manufacturing base.

MARTIN: You have staked your career as an economist on this idea that global trade has harmed America and that the U.S. has lost out because of globalization. But there is a broad consensus among leading economists that free trade works, that the benefits outweigh the costs. What data are you seeing that the majority of American economists aren't seeing?

NAVARRO: Well, first, let me quote the great Vice President Mike Pence on the campaign trail. "The people in Fort Wayne know different. The people in Scranton know different."

MARTIN: Although, we should say that just because a certain community has been disproportionately affected by the trends of globalization does not make it true for the entire country.

NAVARRO: You asked me what the data is. Well, let's start with the $700-billion trade deficit in goods that we run every year. Three hundred and fifty billion of that is with China. Seventy billion of that's with Germany. Another 65 or 70 billion of that is with Japan. They're all running surpluses against us. Malaysia...

MARTIN: Don't we run our own surpluses against even some of our neighbors - Canada, Australia?

NAVARRO: Problem's not Canada or Australia, it's the 15 or 16 countries that we run massive deficits with that total up to $700 billion. But you said, you know, what's the data? The data is simple. If you look at the last 17 years - people know this - they haven't seen their average household income, in real terms, rise. And that is because we've lost our manufacturing base. More data...

MARTIN: But how much of that loss has to do with new technology that has made these systems, made these corporations, made these plants more efficient and productive?

NAVARRO: Demographics and automation are part of the puzzle. But the biggest piece of the action is the unfair trade practices and bad trade deals. And if you don't believe that, just go to the booming factories in Germany, in Japan, in Korea, in China, in Malaysia, in Vietnam, in Indonesia, in Italy. Every place that we're running deficits with are...

MARTIN: Is it frustrating to you that most economists don't agree with you? Is that a source of...

NAVARRO: No, I mean...

MARTIN: ...Consternation?

NAVARRO: No. Look, here's what's interesting about most economists. If you take a hundred economists and put them in a room, probably 95 of them don't teach trade theory. I teach economics. I've taught it for 30 years. These theoretical models that economists postulate go in the dustbin of history, where it belongs.

MARTIN: So would you change? Would you switch America's economy for China's economy or Indonesia's economy?

NAVARRO: Not at all. Well, look, we have the best country in the world in terms of skill set, in terms of natural resources and in terms of manufacturing capability. If you go - and I've done this. If you go and tour throughout the Midwest, which is now the Rust Belt, that place was made to make things. I mean, it's a beautiful thing the way the highways and the rivers are stretched together and the rail lines. What's missing here is a level playing field. And anybody you talk to in any manufacturing facility will look you in the eye and tell you that. The economists just aren't listening.

MARTIN: I hear you. But when you talk - what if you look at agriculture, and you look at the Iowa corn farmer who's trying to be competitive selling his crops to Mexico?

NAVARRO: Agriculture is such an important part of this country. And there's certain portions of the agricultural sector who've been hurt just as badly by these trade deals as well. Here's the thing. Americans need to understand this. The thought process over the last 30 years has been to sacrifice our economy, often on the altar of foreign policy and geopolitics. A lot of these trade deals that we enter into are done not to create jobs here in America, not to boost our income, but to forge alliances and to address things other than the economy.

MARTIN: Well, on that point, Donald Trump has said he's not going to label China a currency manipulator because he needs their help on North Korea.

NAVARRO: Currency manipulation is the province of the Treasury secretary, Steve Mnuchin's. I have no comments on that at all. The broader point is whether or not this country is going to keep entering into trade deals to achieve other objectives....

MARTIN: You think that's wrong. You think that's ill advised...

NAVARRO: ...At the expense of the economy...

MARTIN: ...Letting national security issues...

NAVARRO: ...I will say that on the mountaintop every day I can, that we cannot sacrifice our jobs and our economy on the altar of foreign policy. We have to consider foreign policy issues and national security issues. There's no question about that. But we have to get things in proportion. And we have not done that for a long time.

MARTIN: Peter Navarro heads the new White House Office of Trade and Manufacturing Policy. He also leads the administration's National Trade Council. Mr. Navarro, thanks so much for your time.